I recently wrapped up an interview with Peter Grandich, author of 'The Grandich Letter.' Peter has been one of the most accurate forecasters in modern times, calling the bottom in stocks in March 2009 to the very day as well as the recent top in silver. Here are some highlights of the interview:
Q: Peter, you have been one of the most accurate forecasters I've seen in recent times. In March of 2009, you called the bottom of the stockmarket to the day. Just recently you called the top in silver at $50 and the low at $32. I wanted to get your perspective on gold. We were up as high as $1780 today and are down considerably since then. Do you think we'll see $2000 by the end of the year?
PG: Well, this morning, early this morning, after coming back from Europe, I put out a commentary to my readers, and I guess it could be viewed as good news and maybe not the best of news. And the good news part, I had spoken in recent weeks, that my long standing target of $2000 for gold, which I had when gold was under $500, that I was raising it to $2350. A lot of work that I did suggested that it was more of a likely target than the $2000 gold that I've had for several years. However, I've also noted because of the great movement we had and some technical work, that I was lowering just a bit, my suggested exposure to gold. I has been as high as suggesting 50% of one's total portfolio allocation be to gold itself and felt that gold had been and would continue to be the single best investment and certainly better than stocks and bonds. I took that down a notch because I believe from a valuation standpoint and some technical work, that we were overextended here going into today's trading. Now, if we did catch a bottom in the stockmarket today, it would not surprise me as I wrote again early this morning for my readers, we could walk in and see a $50 or $100 down day in gold. But don't let inevitably what will happen again if we have that, the constant cries for a gold top or a gold bubble by the people that've been wrong for hundreds if not thousands of dollars, throw you off. That would just be a consolidation and some profit taking in a market that looks like it's now finally getting to what many of us suspected it could and that is where it really gets parabolic. So i guess my response to you is, still very constructive to you towards gold. It's not cheap anymore, as I said, but I believe now that it can go higher than I once thought before but we're overextended here for the very short period and some profit taking and some consolidation would actually be healthy and certainly I would welcome it.
Q: I was talking to James Turk the other day and he thinks we'll see $8000 by the time the bull market runs its course, do you have a long-term target on gold?
PG: Well, yes, I just raised it from $2000 to $2350. I was just with Jim, we just spoke at the same conference in London over this past weekend. Jim is a believer that the Dow will eventually equal the gold price or vice versa, that they'll be 1 to 1. One thing I've said and I've said it this weekend and in recent interviews, that what was once called the crazies, the people that talked about $3000 or $5000 or even $8000 gold, suddenly isn't that crazy anymore. In the last couple days, we've had major regular type investment houses start to really ratchet up their price potential for gold. Jim Sinclair, who I think is one of the most accurate forecasters even noted at our conference this past weekend, that a close above (which I don't think we got to today), we closed below $1764, I believe that was his number, would set us up for a parabolic rise where we can go up $500 or even $1000 dollars in a relatively short period of time. What I think right now would be best, markets don't normally do what we think is best, but I do have the belief that the DOW has bottomed short-term here after the close Tuesday, we could see some consolidation and even a sharp correction in gold for a few days to maybe a couple weeks.
Q: Since the S&P announcement, silver hasn't responded as favorably as gold has, gold is up $23 today while silver is down a buck and a half. What's going on with silver?
PG: Well, sometimes when I talk as I'm about to talk, it seems to maybe make some of the real bugs a little upset at me that they feel I'm not as aggressive as I should particularly when silver is concerned. There have been times, most recently within the last year, when I have felt that silver could outperform gold but I've always kept that during those period of times, that at the end of the day, the real hard big money would seek out gold as an alternative monetary tool before it would silver and silver, although there's clearly a great argument that the amount of above ground silver is not as much as people would like us to believe and that there could actually be a shortage fairly soon, still takes, in my book, a secondary role towards gold. Now there's nothing wrong with that. It doesn't have the same big dollar, monetar seeking safety reasons that gold gives. Now, there are others that think differently about that. Eric Sprott, who I spoke with at the conference in Europe this past week, is a very very big silver bug, and he suspects that silver will even outperform gold, but what I think what happens is, and what's happening in recent days, is the speculative more of quantity versus quality is what drives silver and those type of players had more exposure in the stockmarket and took profits out of their silver in order to pay for other things that they were losing in and yet they kept gold as a hard core holding. So, I don't think there's anything wrong with silver, but I haven't felt that it could outperform gold here and I see no reason to think so unless it really sold off and gold didn't and then from a valuation standpoint, I could possibly place it back in the lead again. But for now, I think it's gold first and silver second.
Q: Let's talk about the shares for a second. The mining stocks are not tracking gold higher like you would expect with gold breaking new all-time highs, especially the juniors. People are become more risk averse it seems and the markets have the feeling that they did in 2008, I was reading one of your recent posts on Grandich.com, and you said and I quote "While it appears the baby is being thrown out with the bath water when it comes to mining shares, the overall great performance of many of the physical metals has made most mining and many of the exploration plays, the most compelling ever in my 27 years in and around Wall Street." Now, that's a bold statement, why do you think the shares are such a great buy here?
PG: Well, the second part of that, and I appreciate that quote, the follow up in the next paragraph was a notation by me that I have basically got egg on my face, my peers too but they may not mention it as I was that the expectation certainly was that based on that great performance in the metals, the mining shares and exploration stocks should have been a lot higher and was anticipated to be a lot higher but hadn't and I used the words that you often don't hear from someone in the financial arena and I was wrong. Having said that, because where the metal prices are now and how much discounted the spread between shares and the metals themeselves have become, it made me feel I had to state what you quoted and that was that they had become extremely attractive and in an allocation, where I only suggested no more than 10-20%, I raised that allocation to the upper end to 40% for the most risk oriented speculative person. That was a big step. I don't ever recall having or suggesting that much exposure to one sector, in this case, mining and exploration stocks. So as of this morning before the market opened, I would be bold enough to make a stand and say that they have indeed become the most compelling. Now that's coming from a man that felt they were pretty compelling these last few years, but like you said, are not living up to the hype or hope that many of us gave over these last few years. It's come to the point now, where everything I look at, knowing what's happening in the industry, part of how I make my livelihood particularly on the junior end of companies that it appears that the markets have made them compelling speculations. I do want to make this point, the word speculation is really a word that Wall Street created so it wouldn't have to say gambling and gambling and speculating is both the same thing. When one gambles or speculates, you have to be prepared to lose part or all of your capital, and if you are, then they are very compelling.
Q: As you mentioned, you were a featured speaker this weekend at the GATA Gold Rush 2011 Conference in London. How was the conference and is there anything in particular that stands out that you'd like to share with us?
PG: With no disrespect to any other conferences I've spoken at, I don't remember a more insightful conference that I've took. It might have been because it was all speakers, I don't think any public companies spoke that I remember being on the program, they might have but I might not have been in that period time, and the people that did speak did not have a presentation that would get people interested in what they did but was really just an educational and insightful type of presentation. Whether it was Jim Sinclair or Eric Sprott, or some other speaker or even Andrew Magure, the gentleman who blew the whistle on the silver manipulation, when Peter Grandich is staying in a conference room and sitting in his seat listening to speakers versus when I normally walk away a lot of the time when I'm not the MC because I find that many of the speakers at conferences are making some sort of sales pitches, I thought the GATA conference was clearly better than any I've ever attended. And i think what also came out of the conference, I think there were people from 31 different countries, it was very insightful to hear what the attendees had to say. I guess because it was a fairly large sum to attend the conference, the people who came there were very serious oriented about that investment area and they were very knowledgable. I think it was the most knowledgable group of attendees that I ever met.
Q: Wow, I really wish I had made it (to the conference).
PG: I believe they videtaped it and there will be a video tape I guess GATA will be selling and I would check with GATA, and if I know GATA they won't charge a lot, but I will certainly be telling my readers when that video comes out, they should buy it because like I said, in so many years of MCing these kinds of conferences, there's not much that takes me back where I say "wow, that was really worth hearing." But that was basically what I was saying to myself for almost two days.
Q: We're definitely going to have to get that when it comes out on DVD. Tell us about your newsletter and how listeners can subscribe to it.
PG: It's free, it's a blog. Like I said earlier, part of my livelihood is working for junior exploration companies on the corporate development and public relation side, but no one has to do anything with any company in order to get and see what I think about the markets. It's posted on a blog. They can, if they so choose, to provide an email where they can get an email alert at the end of the night where they can get the last 5 posts of the blog, but here's nothing that they have to purchase or provide in order to get it. And separate from that, I have a business in the state of New Jersey, it's Christian oriented and helps mostly professional athletes in areas of insurance and estate planning.
Me: Peter Grandich, Grandich.com, thank you for being on GoldFiend.com.
PG: Thank you and best wishes and great success with your new site.
